Transmission of Monetary Policy with Heterogeneity in Household Portfolios

By R. Luetticke. 2018

125 citations recorded by the source corpus.

Monetary policy affects both intertemporal consumption choices and portfolio choices between liquid and illiquid assets. The monetary transmission, in turn, depends on the distribution of marginal propensities to consume and invest. This paper assesses the importance of heterogeneity in these propensities for the transmission of monetary policy in a New Keynesian business cycle model with uninsurable income risk and assets with different degrees of liquidity. Liquidity-constrained households have high propensities to consume but low propensities to invest, which makes consumption more and investment less responsive to monetary shocks compared to complete markets. Redistribution through earnings heterogeneity and the Fisher channel from unexpected inflation further amplifies the consumption response but dampens the investment response.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/8bd13c6fe467660e78009e5af3f6857e705b086e

Citations in the corpus

• Monetary Policy and Heterogeneity: An Analytical Framework (2018, unknown): “…Gali, 2017); inequality and aggregate demand (Auclert and Ronglie, 2017); precautionary liquidity and portfolio composition (Bayer et al, 2016 and Luetticke, 2018); fiscal multipliers (Ferrière and Navarro, 2018, Hagedorn, Manovskii, and Mitman, 2018, and Auclert, Ronglie, and Straub, 2018);…”
• CENTRAL BANK POLICIES AND INCOME AND WEALTH INEQUALITY: A SURVEY (2019, unknown): “Bayer et al. (2019) and Luetticke (2018) emphasize the redistributive effects due to the portfolio composition channel .”